Leading U.S. carrier American Airlines Inc. on Wednesday reported a narrower quarterly loss that handily beat forecasts as rising fuel prices were partially offset by increasing revenue.

American, a unit of AMR Corp. (NYSE:AMR - news), posted a first-quarter loss of $92 million, or 49 cents a share, narrower than a loss of $162 million, or $1.00 a share, a year ago.

Wall Street analysts had forecast a loss of 79 cents a share, according to Reuters Estimates.

AMR shares rallied in the news and were up $1.42, or 6 percent, at $25.25 in late morning trading on the New York Stock Exchange, outperforming a flat Amex Airlines index

(^XAL - news).

Fort Worth, Texas-based American has been trying to edge back into the black by keeping a tight reign on capacity, allowing it to fly its planes fuller and demand higher prices. AMR has also sought to get its unions involved in finding areas to cut costs and raise revenues.

American's revenues rose 12.5 percent in the quarter to $5.344 billion.

The narrowed loss came despite an increase of $349 million in its fuel costs over the year-ago period.

The airline said it plans to place 27 of its older, gas guzzling MD-80 aircraft into temporary storage in phases by July 1 to help cut costs.

American shares are the U.S. airline industry's second-best performing shares so far this year and are up 14 percent for the period, compared with a 6.4 percent drop in the Amex Airlines index (.XAL).